Robots as a Service (RaaS): Is It for You?

Robots as a Service (RaaS) is a trend that’s taking off as companies look for ways to increase capacity to meet surging e-Commerce demand.

It’s a business model that has benefits for both the companies implementing the technologies and the robotics technology suppliers, but is it right for you?

According to Coherent Market Insight analysis, the global logistics Robot as a Service market is projected to grow from US$ 4.3 billion in 2021 to US$ 15.8 billion in 2028 at a CAGR of 13.1% in forecast period 2021-2028.¹

Robotics suppliers offering RaaS models usually do so to accelerate adoption of their technology and to overcome financial hurdles standing in the way of end-user companies. In the RaaS business model, the robot manufacturer or integrator provides the equipment for an agreed upon term with a pricing model that is based on one or more of the following:

Time: Number of hours, days, weeks, months
Systems: Number of systems or units of equipment
Work/Volume: Number of units picked/packed
Distance: Miles traversed (for delivery robots)
Services: Analytics, Reporting, Data Storage, etc.

The supplier of the robot often provides technical support, real-time monitoring, maintenance, and other services as part of the agreement.

What is driving adoption of the robots as a service business model? For distributors, it’s a confluence of events:

• A shortage of labor availability in many markets, combined with higher labor costs from rising wages and health care costs, creates a compelling business case for automation.
• Customer expectations for increased speed and accuracy (next-day, same-day, same-hour delivery) and just-in-time inventory strategies require faster distribution and fulfillment operations.
• The need to quickly scale operations with seasonal peaks and valleys and the flexibility to quickly pivot for disruption can be made easier with light infrastructure.
• For some, it’s the talent gap. Automation and robotics require technical expertise and maintenance skills that may not be readily available, cost-effective, or sustainable in-market.

The benefits of the RaaS business model can include a shorter timeline for implementation of turnkey solutions that allow expertise to be outsourced rather than developed in-house. The up-front financial commitment is usually lower than other business models and is mostly OPEX rather than CAPEX. For companies with high aversion to risk, new technologies may be more easily adopted through a lower risk model that allows them to dip a toe in the water without a large-scale commitment.

In a world where flexibility and scalability are key, RaaS may be an attractive option to explore. There are some things to consider with the robots as a service model.

Financial: The all-in costs should be calculated to include any modifications required to the facility, systems, and communications networks. Recurring subscription fees can be quite high and there is no depreciation cost to write down because you don’t own the equipment. The total should be compared not only to the total cost of ownership for the same technology, but to the cost of viable alternative solutions. At FORTNA, we not only look at the cost/benefit analysis of the technology itself but also at the incremental benefit when compared to other lower cost alternative solutions. RaaS agreements must be robust and rigorously examined to handle the complexities of responsibilities for the technology.

Cloud Architecture: Robotics manufacturers structure the execution architecture for their technology differently. Some have the cognitive layer reside entirely in the cloud, while others process certain elements of the cognitive layer at the edge and others in the cloud. You’ll want to be clear about the bandwidth requirements to support the technology and understand any infrastructure changes required before you enter a RaaS agreement.

Calculating Capacity: Manufacturers’ specifications are often calculated on “perfect world” conditions. Calculating how many bots you need for “real world” conditions is more complicated. Be sure you understand the calculations used to determine quantities of units, recharging stations and bandwidth needed, as well as expected uptime, speed, and other factors that determine how your operations perform in terms of throughput, units per hour and critical KPIs of the business.

Maintenance: With RaaS, on-site maintenance can be an issue. While an equipment manufacturer may offer 24/7 technical support, when equipment requires parts or repair that might mean waiting for a technician or shipping to/from a repair facility. Do you have the technical staff with the skills to support the new technology? Depending on the size of your fleet, you may want to consider a mix of owned and subscription-based assets for redundancy.

Change Management: As with any new technology, you will need to prepare your organization from the top to the bottom to accept and adopt new processes and often new KPIs. Role-specific communications and training should be considered and included in the Services Agreement with internal champions and super-users selected to help guide and lead others. New SOPs and training materials will need to be developed too.

Business Continuity: For every headline about a new round of funding acquired in the robotics sector, there is another it seems about the merger or acquisition of a technology provider. Consolidation and product obsolescence are realities as this nascent technology finds its footing. Early adopters of Kiva bots were caught flat-footed when Amazon acquired the robotics company in 2012. Be certain that you have a plan in place with supporting agreements from your supplier to guarantee support for your robot fleet and business continuity for your operation. Consider the cost of removing and replacing the fleet in the event if that becomes the only option available to you.

Technology Roadmap: Some of the new technologies on the market today were born in the robotics lab and are trying to find a home in the warehouse. That will require some operational expertise to home in on practical applications with justifiable ROI. Ask your RaaS provider about their technology roadmap. Do they seem focused on solving warehouse challenges? Do they have operational experience to inform product development?

Warehouse robots offer solutions to some of today’s hardest to solve e-Commerce and omnichannel fulfillment challenges. They do a great job of connecting islands of automation within the distribution center. And they are finding a home in more and more picking, sorting, and packing applications with each new iteration. A Robots as a Service subscription model is a way for suppliers to encourage adoption of robots in the warehouse and for business leaders to leverage these technologies where warehouse labor is scarce or costly.

Are you wondering whether robots are a good fit for your operation? Talk to The Distribution Experts at FORTNA for help in evaluating potential applications for these technologies. Contact us today.

If you liked this post, you might be interested in the following article from our Insights Library:
Seven Types of Warehouse Robots: Considerations for Leveraging Robots in the DC

Click for more insights on:

Warehouse Robots  |  Labor Challenges | Business Case for Automation

^[1]https://www.coherentmarketinsights.com/press-release/robot-as-a-service-market-3786